One of the reasons why I will never remodel again is because I hate dealing with contractors and building inspectors. It is an unfair playing field because they hold more power even though the homeowner is the one with the funds.
Please spend time remodeling while you’re in your 20s and 30s for economic returns. Once you’re in your 40s, unless you’re a masochist, you won’t want to remodel anymore.
The main way contractors hold homeowners hostage is by getting you to sign an attractive bid. Once the contractor collects your deposit or starts the work, you are at the mercy of the contractor’s timeline and business practices.
If a contractor finds a more lucrative job, he will likely delay yours indefinitely. If a contractor wants to charge more for some work, he probably can up to a certain extent. In the scenario where you have a great contractor, hold onto them for dear life!
Switching costs are extremely high, which is why savvy contractors can get away with charging more and taking a longer time to complete the project. They can always blame something for the delay or the extra charge and you will have a hard time doing anything about it.
In this latest episode, let me share with you how my remodeling contractor tried to hold me hostage to extract more money. It is a new strategy I hadn’t experienced before.
By sharing this story, it will wisen you up so you can save money and have a better remodeling experience. Further, I hope this story also propels you to invest in real estate more passively to protect your sanity.
How My Contractor Tried To Hold Me Hostage
When the pandemic began in 2020, I decided to buy a new house and remodel the ground floor of my old house. By expanding the livable square footage by ~300 feet, I could instantly create more value and boost future rental income.
About 90% of the way through with my ground floor project, my contractor finally began to work on building the deck. It was odd, since he had purchased the French doors to replace a fogged-out window 10 months earlier and he had lots of periods of inactivity.
By July 1, 2022, both the ground floor remodel and the deck were finally done. The ground floor remodel had taken two years to complete, when it should have only taken one year. But I didn’t push him hard because the upstairs was already rented. At least the deck had taken a more normal three months to complete.
Delaying The Final Inspection For 30 Days
All that was left to finalize both projects was to call for final inspection. But instead of calling right away, my contractor delayed for a month before he called for final inspection. Why wouldn’t he want to complete the projects and collect final payment from me? I was flummoxed.
His delay caused unnecessary anxiety because the permit for the downstairs remodel was to expire on August 6, 2022. If we missed passing final inspection by August 6, 2022, we would have to apply for another extension and pay more money.
The first final inspection was for the ground floor on August 5, 2022. The second final inspection for the deck was scheduled for Monday, August 8, 2022.
I asked my contractor why the same building inspector had to come twice when he could just kill two birds with one stone. Inspecting the deck takes at most ten minutes. Something seemed off.
My contractor had no good answer except to say he’d try his best to have the inspector sign off on both projects when he arrived on Friday, August 5.
The Building Inspector Finally Came
On Friday, August 5, the building inspector finally came. I was giving my sister and her boyfriend a tour of the Palace Of Fine Arts in San Francisco when my contractor texted me the following message.
Not wanting to wait for his explanation I gave him a call. After several tries, he finally picked up.
He explained to me the downstairs was approved. Hooray! But couldn’t he have just said so over text? Why create more anxiety?
The Inspector Holding My Contractor Hostage
I then asked my contractor about whether the deck was approved. He said “not yet” and that we had a problem. As part of approving the ground floor remodel, he and the inspector had gone all the way up to the top floor to inspect the fire alarms for safety. Once they were on the top floor, the inspector had noticed something amiss.
He had noticed a door that led out to a metal balcony with a railing under 42 inches high. I told my contractor the upstairs had nothing to do with the deck or downstairs remodel. I had purchased the property like that and it should be grandfathered in.
But my contractor basically said he was unsure he’d be able to get the inspector to approve the deck if I didn’t raise the upstairs railing height. In other words, the inspector supposedly held my contractor hostage, who in turn, held me hostage!
My contractor said he could come over and do measurements so he could get his welder to raise the railing. That was a fair solution. However, I was annoyed by this whole situation. At least the downstairs remodel was approved. That was the most valuable portion of the remodel.
If I couldn’t get my deck permitted, it was just as well. I’d save on paying permanently higher property taxes based on the cost of building the deck. I knew the deck was safe and built to code. It was just the inspector not wanting to approve my deck because of an unrelated feature of my house.
It Was All A Ploy By My Contractor!
That evening I decided to check if my signed permit card was already in the electronic database online. Sometimes it can take a while to record.
What I discovered online surprised me. Instead of only my downstairs remodel being approved, my deck was also approved! It turns out that my contractor was just trying to make me sweat in order to make more money.
My contractor wanted to use this extra time to bill me for additional labor hours. He figured the longer he stretched out the project, the more it would seem like his people had worked. While he knew I kept meticulous work and payment records, he hoped I would lose track and enable him to bill me for days his workers had not worked.
Below are some timing details of the inspections for my deck I saw online. CFC means Certificate of Financial Completion.
The details will now go on my home’s 3-R report, which is like a home’s report card. The 3-R report must be disclosed upon property sale. And having a record of permits approved is valuable when it comes time to sell.
However, my story also illustrates why many homeowners like to remodel without permits. Not only do you save on property taxes, you also avoid dealing with inspectors.
Contractor Kept Quiet About The Approval
After the inspector left on Friday, my contractor kept promising me on the phone my deck would get approved “or your money back.” He said he’d let me know on Monday about the status of my deck. But the following Monday came and I heard nothing back from him. In fact, at the time of this publication a week later, I still haven’t heard from my contractor!
My contractor is stretching things out so he can come back to me and say how hard he worked to get the building inspector to approve my deck. By making me think it took many days or even weeks to get the deck approved, he hopes to charge me more money!
I’m just waiting to see how long it will take my contractor to get back to me because I’m curious. I’m also on vacation. But if he tries to pull anything, I’ll just show the timestamp of the approval on August 5. Funny thing is, more than a month later, I’ve still not heard back from my contractor.
Check Online For Your Permit Status
So for those of you looking to remodel, don’t trust the verbal or e-mail progress reports from your contractor. Listen intently and then check online your project’s status. If you filed a permit, there will be detailed notes by date every step of the way. After all, you paid for the building department’s service.
Here in San Francisco, you just go to this link, input your address, and can see Active Permits and Completed Permits sections. If your permit is under the Completed Permits section, you’re good! Below is what I see for my two projects, completed on August 5, 2022.
How To Not Be Held Hostage By Your Contractor
I finally have the upper hand with my contractor. He wants to do more business with me but I don’t want to. Further, I still owe him for a day of labor. I’m the captain now with the bargaining power.
If you don’t want to be held hostage by your contractor, consider the following:
1) Take meticulous notes of the date, work done, hours worked, and amount paid. If you can, take pictures and videos of every stage. You shouldn’t have to pay for work not done.
2) Check online for your project’s progress report. The department of building inspection should have details by date of your project.
3) Agree to a deadline for when the project must be completed by. Consider instituting a penalty for every day that goes beyond the deadline. It may incentivize the contractor to stay on track. During the initial negotiation phase, instituting a penalty is more feasible if the contractor really wants your business and believes in themselves.
4) Offer a bonus if a project is done by a certain date and passes all inspections. A carrot is often better than a stick. Because having your contractor pay a penalty can be tough to enforce once the honeymoon period wears off.
5) Offer new projects if they do a good job. You want to incentivize your contractor as much as possible so they can win more business from you in the future. Just don’t discuss how many properties you own as that might make him want to charge even more for your current job. My contractor straight up told me he charges more for remodels in more expensive neighborhoods, and so do all of his peers.
6) Check at least two recent references. Disgruntled clients will more than likely tell you the truth.
No More Remodeling For Me
Remodeling is a pain because you have to deal with so many people and unforeseen situations. Building codes are always changing as well.
For example, you might get one inspector who wants something one way and another inspector who wants something another way. This is unfair to the homeowner, but the inspectors hold all the power.
You might also have neighbors who complain or restrict you from doing something on your property. If a complaint is filed, an inspector will drive out to your house and make an assessment. In such a situation, you will end up paying for more work and lose precious time.
Remodeling is also painful because you might be dealing with shady contractors. They might also disappear for months and hold you hostage once they’ve accepted your money and started the job. Unless you want to start all over, you’re at the contractor’s mercy.
Finally, there are supply chain issues that can delay the delivery of goods. If a contractor installs an important part wrong or an important part arrives damaged, then your project will be delayed. One time, a metal shower bar arrived bent. As a result, the sliding glass doors couldn’t close or open properly. That resulted in a five-week delay.
Remodel While You’re Still Young
Remodeling is a young person’s game. Do so while you still have the time, energy, and patience. With a lower wage, your time is less valuable so you can better afford all these delays.
Once you’re over 40, I’d invest more in passive private real estate to save your sanity. Your time is much more valuable and your tolerance for BS declines. Further, you will have less patience for shenanigans. I am so much happier earning 100% passive real estate returns and income than I am from my physical rental properties.
The good thing is remodeled properties should sell for bigger premiums in the future given how much harder it is to remodel today. I’m glad to have added value to my rental property. However, I will never remodel another property again. It’s simply too stressful and not worth the returns for me anymore.
Invest In Real Estate More Strategically
Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Stocks are fine, but stock yields are low and stocks are much more volatile.
Take a look at my favorite real estate investing platforms, Fundrise. It is free to sign up and explore. Fundrise focuses on single-family and multi-family rental properties in the Sunbelt, where valuations are cheaper and rent growth is stronger.
Fundrise has been around since 2012 and has consistently generated steady returns through the ups and downs of the stock market. The real estate platform has over 300,000 investors and manages over $3.2 billion.
I’ve personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.
Action Items For Your Own Financial Health
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